The government has paused plans to require Britain’s two million small companies to file profit and loss accounts at Companies House, reversing course yesterday on a measure designed to tackle economic crime.
The requirement, part of the Economic Crime and Corporate Transparency Act 2023, had originally been due to take effect in April 2027. In June the government recommitted to the reform but delayed it until April 2028, after ministers had spent months reviewing whether to press ahead with the rules.
The change would have required small companies, micro-entities and incorporated sole traders to prepare and file more detailed accounts at Companies House, including a complete profit and loss statement and balance sheet.
Under the pause, companies will still be able to file abridged accounts and to remove, or “fillet”, profit and loss information from accounts filed after 1 April 2028, according to Companies House. It said the separate requirement for all companies to file accounts in iXBRL format using commercial software from April 2028 is going ahead as planned, with web and paper filing closing for accounts.
The government said it continued to see “enormous value” in Companies House having access to profit and loss accounts “for all companies” as part of its efforts to tackle fraud, tax evasion and other economic crimes. HMRC estimates that small businesses account for about 60 per cent of the UK’s £47bn tax gap.
However, the government said it also recognised “business concerns” about commercial confidentiality, as well as the administrative burden of the requirement. It said it would freeze further work on requiring small companies to report more information until it could better co-ordinate the needs of Companies House and HMRC.
Tina McKenzie, national chair of the Federation of Small Businesses (FSB), said the decision was “a huge step in the right direction, averting a huge new weight of red tape on the very businesses with the fewest resources to deal with it”.
Lena Levy, deputy director of policy at the British Chambers of Commerce, said it was important that the pause was “used as a genuine opportunity to streamline filing processes. It must not be just a delay to bringing in the requirements at a later stage.”
UK Finance, which represents credit providers making lending decisions to small companies, also backed the change. “While proportionate regulation provides important protections, cutting unnecessary red tape will give SMEs more time to invest in and grow their businesses,” a spokesperson said.
The decision is one of a series of regulatory reforms which the government said would save businesses more than £600m a year. These include standardising the criteria for small firms to bid for public sector construction work and streamlining Office for National Statistics survey requests.
In a separate measure, the Treasury said it was extending import tariff suspensions on more than 250 products used by businesses until December 2028, saving them up to £155m a year. A consultation opening on 11 November and running until 3 February will ask whether the exemptions should be broadened and extended beyond 2027.
The prime minister, Andy Burnham, and the chancellor, John Healey, accepted some, but not all, of the recommendations of a small business taskforce set up to tackle bureaucracy holding back business growth. “If you run a business, you want to spend your time serving your customers, creating jobs and growing your firm, not filling in unnecessary forms,” Mr Burnham said.
The government has set itself a target of reducing the administrative burden of regulation by 25 per cent by the end of this parliament. The FSB has welcomed the target but warned that “previous governments have not matched their lofty promises about pruning back overly burdensome rules with concrete action”. The Institute of Directors backed the government’s objective but urged ministers to weigh the cumulative impact of introducing several changes at once.
A Department for Business and Trade survey published in July found that 96 per cent of respondents said red tape was “creating unnecessary problems” in their industries. Some 89 per cent said rules and regulations, often applied inconsistently and processed slowly, were imposing “unreasonable costs”.
